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More than one in four developing economies still have lower per capita income than before the COVID-19 pandemic, exposing a deep and persistent divide in the global recovery, the World Bank has said.
“More than one-quarter of emerging market and developing economies (EMDEs), particularly low-income countries and those affected by fragility and conflict, still have per capita incomes below 2019 levels,” the World Bank said in its January Global Economic Prospects report.
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The finding highlights what the bank described as a sharp divergence beneath the surface of a resilient global economy.
While nearly 90 per cent of advanced economies have recovered beyond pre-pandemic income levels, many poorer countries are still struggling to regain lost ground, reversing years of progress in living standards.
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The World Bank said global growth held up better than expected last year despite heightened trade tensions and policy uncertainty.
Stockpiling of traded goods, strong risk appetite in financial markets and a surge in artificial intelligence-related spending supported activity, while supply chains adapted to rising trade barriers.
Lost decades
However, the report warned that the resilience masks a deeper, long-term slowdown.
The 2020s are projected to be the weakest decade for global economic growth since the 1960s, with average global GDP growth expected to slow to about 2.6 per cent.
This compares with average growth of 5.4 per cent in the 1960s and 4.1 per cent in the 1970s, before easing steadily over subsequent decades.
According to the bank, the slowdown reflects structural pressures rather than temporary shocks, including weaker productivity growth, ageing populations in major economies, the fading momentum of globalisation and the lasting effects of past crises such as the 2008 financial crash and the pandemic.
Looking ahead, global growth is projected to edge down to 2.6 per cent in 2026 as trade growth weakens and firms scale back inventory accumulation, before ticking up slightly to 2.7 percent in 2027.
The Bank said the outlook remains fragile, particularly for developing economies.
Many EMDEs continue to face high debt burdens, limited fiscal space and growing climate risks, which are weighing on investment and job creation.
Although some proved more resilient to recent trade headwinds than expected, prospects across regions remain uneven, the report said.
Without stronger economic momentum, the World Bank warned that many developing economies will struggle to create enough jobs for their expanding working-age populations.
It called for reforms to diversify trade, strengthen macroeconomic frameworks and remove structural bottlenecks, alongside greater investment in infrastructure, education and health.
“To catalyse investment and support long-term growth, policy makers in EMDEs should advance domestic reforms to diversify trade, strengthen macroeconomic frameworks, and remove structural bottlenecks. Without stronger economic dynamism, many EMDEs will struggle to create enough jobs for expanding working-age populations.
“Key pillars to address this jobs challenge include policies that promote physical, digital, and human capital infrastructure; that secure a better business environment; and that mobilize private capital to help meet substantial investment needs,” it said.
Near-term risks to the global outlook remain tilted to the downside, including the escalation of trade tensions, tighter financial conditions and renewed inflation pressures.
While broader adoption of AI could support growth, the bank said coordinated global efforts are needed to improve the trade environment, ease financing constraints and prevent a widening development gap that could leave millions poorer for longer.
